Correlation Between Aerovate Therapeutics and Virax Biolabs

Can any of the company-specific risk be diversified away by investing in both Aerovate Therapeutics and Virax Biolabs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aerovate Therapeutics and Virax Biolabs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aerovate Therapeutics and Virax Biolabs Group, you can compare the effects of market volatilities on Aerovate Therapeutics and Virax Biolabs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aerovate Therapeutics with a short position of Virax Biolabs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerovate Therapeutics and Virax Biolabs.

Diversification Opportunities for Aerovate Therapeutics and Virax Biolabs

-0.42

Correlation Coefficient

Aerovate Therapeutics  Virax Biolabs

Very good diversification

The 3 months correlation between Aerovate and Virax is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Virax Biolabs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virax Biolabs Group and Aerovate Therapeutics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aerovate Therapeutics are associated (or correlated) with Virax Biolabs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virax Biolabs Group has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Virax Biolabs go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Virax Biolabs

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 1.11 times less return on investment than Virax Biolabs. But when comparing it to its historical volatility, Aerovate Therapeutics is 2.43 times less risky than Virax Biolabs. It trades about 0.21 of its potential returns per unit of risk. Virax Biolabs Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Virax Biolabs Group on August 16, 2024 and sell it today you would earn a total of  24.00  from holding Virax Biolabs Group or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aerovate Therapeutics  vs.  Virax Biolabs Group

Aerovate Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Virax Biolabs Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virax Biolabs Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virax Biolabs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and Virax Biolabs

The main advantage of trading using opposite Aerovate Therapeutics and Virax Biolabs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerovate Therapeutics position performs unexpectedly, Virax Biolabs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Virax Biolabs will offset losses from the drop in Virax Biolabs' long position.

The idea behind Aerovate Therapeutics and Virax Biolabs Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.